NEW YORK – Billionaire investor Carl Icahn is launching a proxy contest to unseat Yahoo’s board of directors, according to a person close to the matter – a move aimed at pressuring the Internet company to reach out to Microsoft Corp. to re-start sale discussions.
Icahn plans to nominate 10 directors to replace Yahoo’s board before a deadline Thursday, an unnamed source told The Wall Street Journal. Icahn’s nominees will include former Viacom Inc. Chief Executive Frank Biondi, who has worked with Mr. Icahn on other proxy fights.
Some major Yahoo shareholders have expressed disappointment that the Sunnyvale, Calif., company didn’t reach a deal to sell to Microsoft, which withdrew its unsolicited offer May 3. Some shareholders have contacted Icahn to urge him to take action, said people close to the matter. Reuters previously reported Icahn’s decision to proceed with a proxy effort.
Icahn, who bought roughly 50 million Yahoo shares since Microsoft withdrew its offer, spent the last few days deliberating the proxy move, before deciding Wednesday, said one of the people familiar with the matter. One reason for the deliberation: Microsoft has suggested that it has moved on and doesn’t plan to consider any new offer for Yahoo.
People close to the matter said Icahn failed to get a response from Microsoft about its interest in re-starting the acquisition talks. He elected to proceed because he views a deal with Microsoft as beneficial to both companies, and one that executives would come to embrace. People close to the matter said Icahn has hired D.F. King, a proxy firm, to work on a proxy solicitation.
Yahoo could potentially offer to enlarge its board to include a few directors backed by Mr. Icahn in return for his dropping any proxy effort to unseat the current board. New York Times Co. recently employed a similar strategy, giving two seats on an enlarged board to representatives of dissident investors who were pushing to win four board seats in a shareholder vote.
But Icahn is focused on pushing Yahoo back to the bargaining table with Microsoft and believes that he needs more than a few board seats to get a recalcitrant Yahoo talking again, according to the person close to the situation. So he’s aiming for more than a few seats on Yahoo’s board of directors.
Icahn’s strategy is to put up a board slate and exert pressure on Yahoo along with other unhappy shareholders, hoping it will provide executives of both companies with a justification to re-start talks. Spokesmen for Yahoo and Microsoft would not comment.
Icahn argues any deal with Microsoft would need to be executed soon, according to people close to the matter, before Microsoft loses all interest in a purchase and Yahoo takes any steps that could make a deal less likely, such as agreeing to an acquisition of its own.
“He’s invested over a billion dollars so he must have a good feeling he can facilitate a deal,” said Claudia Allen, a corporate governance attorney at Neal, Gerber & Eisenberg LLP in Chicago. “He could be doing Microsoft’s heavy lifting — a proxy contest can be expensive, nasty and the outcome uncertain,” she said. “If he wins the board it may enable Microsoft to do a friendly deal.”
Separately, Yahoo continues to negotiate with Google Inc. over a possible arrangement to carry Google search advertisements, said people familiar with the matter. These people said no announcement is expected this week, but that a deal – which analysts say should boost Yahoo’s cash flow – is more likely than not.
One of the people said that some at Google still have concerns about advertising-related data Google might share with Yahoo under such an arrangement and Yahoo’s ability to use that data to improve its own search-advertising system to Google’s competitive disadvantage over time. The two sides are also still discussing how a search-ad pact could be structured to pass muster with antitrust regulators, the people familiar with the matter said.
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